Airbase Acquisition: Key Details, Impact, and What Comes Next

Paylocity's acquisition of Airbase marks a significant step in the industry, combining HR and finance management into a unified platform. This strategic move aims to enhance real-time visibility and financial controls for nearly 40,000 clients, positioning Paylocity as a comprehensive solution provider in the market.

What Is Airbase?

Founded in 2017, Airbase offers a comprehensive procure-to-pay platform designed to streamline financial operations for businesses. Its core products include guided procurement, AP automation, expense management, and corporate cards. Unique selling points include AI-powered, touchless AP and expense reporting, integration with over 70 ERPs, and a user-friendly experience. Additionally, Airbase supports versatile card programs and provides a no-code routing system to ensure compliance and control.

Who Acquired Airbase?

Paylocity is a prominent provider in the HR and payroll solutions industry, known for its innovative technology and comprehensive product suite. Key offerings include payroll software, benefits administration, HR management, time and attendance tracking, talent management, and employee experience enhancements. The company also provides robust HR reporting tools and mobile solutions. Paylocity's market position is reinforced by its commitment to continuous product development and exceptional customer service, making it a leader in modernizing the employee experience.

When Was Airbase Acquired?

Paylocity completed its acquisition of Airbase on October 1, 2024. This strategic move aligns with industry trends of integrating HR and financial management solutions to offer a unified platform. The timing is significant as businesses increasingly seek comprehensive tools to streamline operations and enhance financial visibility. This acquisition positions Paylocity to meet the growing demand for integrated spend management and HR solutions, reflecting broader market shifts towards holistic business management platforms.

Why Was Airbase Acquired?

• Market Expansion: The acquisition of Airbase allows Paylocity to broaden its market reach by integrating spend management solutions into its existing Human Capital Management (HCM) platform. This move expands Paylocity's total addressable market beyond HCM and into the Office of the CFO, offering a more comprehensive solution to its nearly 40,000 clients and attracting new prospects in the mid-market segment.
• Technology Integration: By integrating Airbase’s finance solutions, Paylocity enhances its platform to manage both payroll and non-payroll spend through a single interface. This integration provides real-time visibility, faster financial close, improved planning, and stronger financial controls, thereby streamlining financial operations and enhancing overall efficiency.
• Competitive Advantage: The acquisition strengthens Paylocity's position as a leading software platform by offering a unified solution for managing all business-related spend. This comprehensive approach delivers a modern client experience and a compelling value proposition, setting Paylocity apart from competitors who may rely on disparate software solutions or manual processes.

Acquisition Terms

• Acquisition Price: $325 million
• Payment Method: The acquisition will be funded by borrowings under Paylocity’s revolving credit facility.
• Key Conditions or Agreements:
  • The transaction is subject to customary closing conditions and necessary regulatory approvals.
  • The acquisition is expected to close in the first or second quarter of fiscal 2025.
  • The acquisition is expected to dilute adjusted EBITDA margin by approximately 100 basis points in fiscal 2025.
  • Paylocity will update financial guidance in their first quarter fiscal 2025 earnings release.
  • The acquisition is not expected to impact Paylocity’s ability to execute on the remaining $350 million authorization under its share repurchase program.

Impact on Airbase

The acquisition of Airbase by Paylocity brings significant changes to Airbase's operations and management. The integration of Airbase’s finance solutions with Paylocity’s Human Capital Management (HCM) platform aims to create a unified experience for managing both HR and financial operations. This operational shift is expected to streamline processes, providing real-time visibility into payroll and non-payroll spending, faster financial closes, improved planning, and stronger financial controls. Thejo Kote, founder of Airbase, expressed optimism about leveraging Paylocity’s scale to reach a larger audience, indicating a positive outlook on the management front.

In terms of product offerings, the acquisition expands Paylocity’s suite to include Airbase’s spend management platform, which features bill pay/accounts payable automation, expense management, corporate cards, procurement, and workflow automation. This comprehensive integration is designed to enhance the client experience by offering a single platform for all business-related spend. While specific employee and customer reactions were not detailed, the unified platform is expected to be well-received by Paylocity’s nearly 40,000 clients, providing a compelling value proposition for both existing and prospective customers.

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